Debt Relief, Investment and Growth

Pernilla Johansson ()
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Pernilla Johansson: Ministry of Finance, Postal: Ministry of Finance , Drottninggatan 21, SE-10333 Stockholm, Sweden

No 2008:11, Working Papers from Lund University, Department of Economics

Abstract: The donor community provided around $400 billion in debt relief to developing countries between 1989 and 2004. This paper empirically assesses the impact of debt relief on growth and investment by examining two potential mechanisms. The resource mechanism refers to the resources made available from reduced debt service payments whereas the incentive mechanism takes into account the incentive effects of a reduced debt stock. Based on a sample of 61 developing countries between 1989 and 2004, this study shows that debt relief did not affect growth directly or through capital investment.

Keywords: Debt relief; growth; investment; developing countries; HIPC (search for similar items in EconPapers)
JEL-codes: F34 F35 F43 O11 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-opm
Date: 2008-08-07
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Published as Johansson, Pernilla, 'Debt Relief, Investment and Growth' in World Development, 2010, pages 1204-1216.

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Persistent link: http://EconPapers.repec.org/RePEc:hhs:lunewp:2008_011

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